Decision  Decision of August 29, 2013

Date:	08/29/2013
Organization:	Division of Banks

• Petitioner: Salem Five Cents Savings Bank
• Respondent: Division of Banks

Decision relative to the merger of Stoneham Savings Bank, Stoneham, Massachusetts with and into Salem Five Cents Savings Bank, Salem, Massachusetts

Salem Five Cents Savings Bank (“Salem Five” or the “Petitioner”), Salem, Massachusetts has applied to the Division of Banks (the “Division”) for authority to merge with Stoneham Savings Bank (“Stoneham Savings”), Stoneham, Massachusetts pursuant to the provisions of Massachusetts General Laws chapter 168, section 34 and under the terms of an Agreement and Plan of Merger dated March 26, 2013 (the “Agreement”). The Agreement provides for the merger of Stoneham Savings with and into Salem Five, under the name, charter and by-laws of Salem Five. The main office of Salem Five would remain the main office of the continuing institution and the banking offices of Stoneham Savings would be retained as branch offices of the continuing institution, operating under the trade name “Salem Five Cents Savings Bank, formerly Stoneham Savings Bank.”

Notice of the bank merger application was posted as directed by the Division thereby affording opportunity for interested parties to submit comments.  The period for filing comments has expired.  The Division reviewed the application and all related documents in accordance with the statutory criteria of whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage and net new benefits would be promoted by approval of the proposed transaction.  The record of performance of the two banks under the Commonwealth's Community Reinvestment Act (“CRA”), Massachusetts General Laws chapter 167, section 14 and its implementing regulation, 209 CMR 46.00 et seq. also were factors considered by the Division.

Salem Five is a Massachusetts savings bank chartered in 1855.  Its deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by federal law, and by the Depositors Insurance Fund (“DIF”) for all deposits in excess of FDIC coverage.  Salem Five had consolidated assets of approximately $3 billion as of March 31, 2013.  In addition to its main office in Salem, Massachusetts, Salem Five operates 24 full service branch offices in Essex, Middlesex, and Suffolk Counties. 

 Stoneham Savings is a Massachusetts savings bank that was also chartered in 1855.  As of March 31, 2013, Stoneham Savings had total assets of approximately $328 million.  In addition to its main office in Stoneham, Massachusetts, Stoneham Savings has five branches located in Essex and Middlesex Counties.  Stoneham Savings’ deposits are insured by the FDIC to the maximum extent permitted by federal law, and the DIF for all deposits in excess of FDIC coverage.  On February 1, 2012, Stoneham Savings became a subsidiary banking institution of Salem Five Bancorp, Salem, Massachusetts as a result of the merger of Stoneham Bancorp, MHC with and into Salem Five Bancorp. 

In analyzing the impact of a proposed transaction on banking competition, the Division considers, but does not rely exclusively on, the guidelines used by federal authorities to review bank mergers.  Essentially, these guidelines define relevant markets and measure concentration, which is considered an important indicator of competitiveness.  The Division also considers a proposed transaction on its impact on affected communities.  Although both Salem Five and Stoneham Savings have banking offices in the municipalities of Burlington, Malden, North Andover, and Stoneham, it is noted that there are numerous banking offices of other banks located in those municipalities, as well.  Therefore, customers will continue to be able to choose, if they desire, from a variety of banking options.  Furthermore, in this case, the proposed transaction will not unreasonably affect competition as the Banks are already affiliates as indirect, wholly owned subsidiaries of Salem Five Bancorp.  Accordingly, the Division’s analysis of the competitive impact of the merger does not raise concerns which would preclude approval of the proposed transaction.

The Division has also considered the record of this application to determine whether public convenience and advantage will be promoted by this transaction.  As a result of the proposed merger, the Petitioner states that the communities served by the banks will benefit by the establishment of a larger, full-service local community bank with greater operating efficiency and greater lending capability.  According to the application, customers of both banks will benefit from the combined institution, with resources to expand the delivery channel base beyond that available to either bank individually.  The continuing institution will have significantly higher lending capacities than previously available to Stoneham Savings to assist in meeting customers’ needs.  The Petitioner states additionally that the post-merger increase in size and resources will provide the continuing institution with the ability to offer its products and services in a more efficient manner, spreading fixed costs over a larger asset base, and that the combined talent and expertise of bank personnel will allow the continuing institution the opportunity to develop and market new products and variations of existing products.  The Division considered these reasons and others cited in the submitted documents in determining that public convenience and advantage will be promoted by approval of this transaction.

In determining whether or not to approve a petition under the statutory criteria, the Commissioner is also required to consider a showing of “net new benefits” related to the transaction.  That term, as set out in Massachusetts General Laws chapter 168 includes initial capital investments, job creation plans, consumer and business services, and commitments to maintain and open branch offices, among other factors, which the Commissioner may deem necessary.  The Petitioner has addressed this requirement of statute.  All current employees of both Salem Five and Stoneham Savings will become employees of the continuing institution.  Specifically, the merger is not expected to result in the loss of any jobs and no terminations of employment are planned in connection with the merger.  Salem Five anticipates, furthermore, that the merger may facilitate future job creation as an indirect result of the merger.  Salem Five does not intend to close any branches or discontinue any services as a result of the merger.  The Petitioner cites the maintenance of a “well capitalized” bank, able and willing to support the community, providing economic support for the local area, and other factors as support for meeting such statutory criteria.  

Related to the issue of public convenience and advantage is the record of performance under CRA by the banks which are parties to this transaction.  Such review for a state-chartered bank includes examination by personnel of the Division as well as analysis of concerns received from the bank's community and its response to those concerns fairly raised.  A publicly available descriptive rating and evaluation by a federal bank regulatory agency will also be considered.  The Division has noted that Salem Five received a “Satisfactory” rating on its most recent CRA performance evaluation.  Stoneham Savings has also received a “Satisfactory” rating in its most recent CRA performance evaluation.

The application states that, in connection with the merger, the continuing institution’s Board of Directors will consist of all of the persons currently serving as directors of Salem Five with the addition of three directors of Stoneham Savings.  The management personnel of the continuing institution will be comprised of the persons currently serving as executive officers of Salem Five and Stoneham Savings.  Economies and service capabilities which would result from the transaction are set out in the submitted documents.  Upon consolidation, the continuing bank will meet all required capital standards.  Overall, financial and managerial considerations support the application.

Upon review of the application with reference to the relevant statutory and regulatory requirements, this Division has concluded that all such requirements have been met and that consummation of the proposed consolidation would be in the public interest.  On the basis of these considerations, approval is granted to merge Stoneham Savings with and into Salem Five under the charter, by-laws, and name of Salem Five pursuant to the provisions of Massachusetts General Laws chapter 168, section 34.

The approval granted herein is subject to the following conditions:

1. that the proposed merger of Salem Five and Stoneham Savings shall not become effective until a Certificate signed by the Presidents and Clerks, or other duly authorized officers of each bank, indicating that each institution has complied with the provisions of Massachusetts General Laws chapter 168, section 34 has been returned for my endorsement thereon;
2. that the proposed merger shall not become effective until Articles of Merger with my endorsement thereon are submitted to the Secretary of State; and
3. that the proposed merger shall be consummated within one year of the date of this Decision.

August 29, 2013
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Date


David J. Cotney
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Commissioner of Banks